Larry McBurney is a Democratic member of the Iowa House representing part of Urbandale.
For years, Iowa Republicans have argued that lower taxes will attract people, businesses, and investment to the state. Governor Kim Reynolds made that case in 2022 while promoting her income tax plan, telling people elsewhere, “Come, move to Iowa.”
The results have been less dramatic than the sales pitch. Iowa’s population grew 1.5 percent from 2020 to 2025, compared with 3.1 percent population growth nationally. More notably, Iowa experienced net domestic outmigration during that period: 10,148 more people moved from Iowa to another state than moved here from another state.
At the same time, Iowa is spending more than it takes in through recurring revenue. For fiscal year 2027 (which began on July 1), the nonpartisan Legislative Services Agency projects about $8.4 billion in adjusted revenue and $9.645 billion in appropriations, with the difference covered in part by accumulated balances and a $617.8 million transfer from the Taxpayer Relief Fund.
In plain English, that’s what we call a deficit. Iowa has money in savings, so it can cover the difference for now. But a household that uses savings to cover the gap between income and expenses is still spending more than it earns.
Against that backdrop, Republican gubernatorial candidate Zach Lahn has recently proposed two new tax-based economic policies. Both look good in a press release, but fall flat when you do the math.
$50 at the pump
Lahn’s “Iowa First Energy Policy” calls for cutting Iowa’s gasoline, diesel, and E15 taxes by 50 percent for six months. His campaign says the change would provide “direct, immediate relief” to families, farmers, truckers, and small businesses.
For an ordinary driver, the savings are modest. Iowa’s gasoline tax is $0.30 per gallon, so a 50 percent reduction saves $0.15 per gallon. I believe my wife, Luisita, is fairly ordinary when it comes to driving habits. She fills up her gas tank once a week and it takes 13 gallons – give or take – to top her off. 13 gallons over 26 weeks produces a savings of about $50.
$50 is still $50. I don’t think anyone would turn away $50. The problem is the way the proposal is being sold compared with the relief it actually provides.
The benefit also grows directly with fuel consumption. A small trucking business burning thousands of gallons may save $1,000 or more over that same six month stretch. A large fleet – such as Werner or UPS, for example – using 100,000 gallons of Iowa-taxable diesel saves $16,250. Everyone receives the same reduction per gallon, but they’re definitely not receiving the same total benefit.
That distinction matters in Iowa because interstate trucking companies pay fuel taxes through the International Fuel Tax Agreement. Carriers must track the distance traveled in each jurisdiction, including Iowa. Reducing Iowa’s fuel tax therefore benefits interstate commercial traffic using Iowa roads. Carriers like Werner or UPS could be saving tens of thousands in fuel costs as a result of Lahn’s fuel tax policy.
With that said, small trucking businesses are legitimately hurting from high fuel costs and that pain shouldn’t be brushed aside. A trucker who uses roughly 100 gallons every two to three days could save somewhere around $1,000 to $1,500 over the six-month period. For a small business owner-operator, that’s real savings, but it’s still a temporary band-aid on the proverbial Hoover Dam.
Cutting roughly $0.16 from the diesel tax does not solve the larger problem of expensive fuel. If small Iowa trucking businesses are operating on margins so thin that roughly $1,000 in temporary relief determines whether they survive, then Iowa should be having a broader conversation about what is driving those costs and what sustainable relief really looks like.
The roads won’t fix themselves
Fuel tax revenue makes up roughly half of the Road Use Tax Fund. Cutting the fuel tax in half reduces revenue to that fund by approximately 25 percent. Lahn acknowledges that problem by promising to “fully backfill” the Road Use Tax Fund through a temporary pause in tax-exemption benefits for qualifying data center investments. The problem is that his campaign hasn’t publicly shown the math.
Iowa’s data center incentives are complicated. Depending on the size and timing of an investment, qualifying data centers can receive exemptions or refunds for equipment, electricity, backup-generation fuel, and other infrastructure. Some exemptions are permanent, while others last five, seven, ten, or fifteen years. Lahn’s proposal doesn’t provide a public estimate of how much fuel tax revenue would be lost, how much money the proposed data center changes would generate, or whether those two numbers actually match.
Maybe they do. But “fully backfilled” is a claim that should come with numbers.
There are also unanswered questions about which projects would be affected. The legislature can change tax policy prospectively, and Iowa has eliminated tax exemptions before. But existing projects may already qualify under current law, making the details of any proposed “pause” important. Before Iowa cuts a constitutionally protected transportation revenue source, voters should know exactly where the replacement money comes from and whether it’s enough.
Another tax exemption, another set of unanswered questions
Lahn has also proposed exempting some young Iowans from state income taxes and placing the amount they otherwise would have paid into an account for the purchase of a first home. This plan seems eerily similar to the FirstHome Iowa Accounts program created by Senate File 2472, similar to the 529 plan for college savings. Which raises the question: how many savings accounts do Iowans need to make housing more affordable?
According to Lahn’s campaign, his proposal would apply to some Iowa high school graduates who remain in the state, with possible eligibility for returning former Iowans and workers in certain shortage occupations. Important details, including the length of the exemption, final eligibility requirements, and total cost, have not yet been specified.
Again, the goal is something we should be striving for. Iowa should want young people to stay here, and homeownership is increasingly difficult for first-time buyers.
But tax policy should be judged on more than its headline.
How long does the exemption last? Is there an income limit? Which occupations qualify? What happens if someone accumulates money and later leaves Iowa? How much General Fund revenue would the state give up?
Those questions matter even more when Iowa is already dipping into its proverbial savings account to keep the lights on.
There are other ways to address affordability
It’s easy to kick back and criticize proposals. We should be expected to provide alternatives if we find issue in a policy proposal. I’m proud to say Iowa House Democrats did just that by introducing several bills during the past legislative session, taking a more direct approach to household costs:
- House File 2729 would have temporarily prohibited increases in electric and natural gas utility rates and charges through the end of 2030.
- House File 2731 proposed a percentage-of-income utility payment program for qualifying households.
- House File 2738 would have created a state subsidy replacing the enhanced Affordable Care Act premium tax credit that expired federally, providing eligible Iowans with assistance equal to what they would have received under the former federal credit.
- House File 2730 addressed unlawful retail-pricing practices, including situations where consumers are charged differently from an advertised price, otherwise known as dynamic pricing.
- House File 2373 would establish a retirement savings plan trust to ensure every Iowan has the option to save for retirement, regardless of how small their employer is.
I also have a bill being drafted for the upcoming session aimed at reducing the cost of private mortgage insurance for qualified first-time homebuyers who cannot make a 20 percent down payment. Rather than offering a broad tax break and hoping it eventually helps someone buy a home, the goal is to reduce a specific cost currently creating a barrier that makes homeownership more expensive for first-time homebuyers.
These ideas are not free, and they deserve scrutiny. But they begin with a different question: what expense is actually hurting Iowa households and how can we reduce that expense directly?
If utility bills are the problem, address utility bills. If health insurance premiums rise because a federal subsidy disappears, address the premium. If mortgage insurance is making a first home less affordable, address mortgage insurance. If a retailer advertises one price and charges another, stop the upcharge.
That is a more targeted approach than repeatedly cutting broad taxes and assuming the benefits will solve whatever economic problem is being discussed.
Show Iowans the math
There is nothing inherently wrong with cutting taxes. There is nothing wrong with trying to reduce fuel costs or help young Iowans buy homes.
But Iowa voters deserve more than a good headline.
Lahn’s fuel tax proposal would save an ordinary driver buying 13 gallons a week about $50 over six months. A small trucking operation may save $1,000 to $1,500, while the largest fuel consumers receive tens of thousands of dollars. His campaign says the Road Use Tax Fund will be fully protected, but it hasn’t publicly demonstrated that the proposed data center changes would replace the lost revenue.
His homeownership proposal has a worthy goal but still lacks important details about cost, duration, and eligibility. Meanwhile, Iowa is already spending more from the General Fund than it brings in through recurring revenue.
Those facts do not mean every tax proposal should be rejected. They do mean Iowans should demand more than promises about what they will no longer have to pay.
A serious economic policy should answer three basic questions: What does it cost? Who receives the benefit? And who pays for it?
On Lahn’s latest proposals, too many of those questions have yet to be answered.
Top photo of Governor Kim Reynolds with Zach Lahn at the Iowa State Fair was first published on Reynolds’ political Facebook page.